The preceding illustration demonstrated the purchase and sale transactions for Roger Retailer. Assume Roger Retailer paid to the manufacturer the balance owing and was entitled to claim a 5% settlement discount. Record the journal entry to pay the amount owing to the manufacturer (supplier).
Reasoning Using the same logic as illustrated for discount allowed, the discount received by Roger Retailer will need to be adjusted for the input tax credits not available as Roger Retailer paid to their supplier the amount per the invoice less the discount amount. The amount owing to the supplier is the original purchase of 10 tables (\($4400)\) less the purchase return of 3 tables (\($1320).\) The amount owing is \($3080.\) This amount is subject to a 5% discount, so \($2926\) is payable. The amount of GST paid in the balance owing is \($280\) (7 tables × \($40)\) or \($3080\) ÷ 11 = \($280.\) So, the increasing adjustment is \($280\) × 5% = \($14.\) The discount revenue is \($140\) (\($3080\) × 5% × 10 ÷ 11).